Meet Joe Killinger of Pono Asset Management in Brentwood
Today we’d like to introduce you to Joe Killinger.
Thanks for sharing your story with us Joe. So, let’s start at the beginning and we can move on from there.
Like many before me I decided to move out to California to seek my fortune. I packed my car and left a small farming town in Nebraska, skipping the last couple years of college to seek work. Unfortunately, an unexpected car repair on the drive to California, quickly ate through my nest-egg, so I needed to make money right away, but had no real experience. I took the first jobs I found, a sales position at Stride-Rite shoes in Laguna Hills mall selling children’s shoes during the day, and working in telemarketing most nights. My passion has always been real estate, so I began working on getting my real estate license during my free time (I had a lot of that, since I really didn’t have any disposable income at the time) and received my license shortly thereafter.
After receiving my license I started working in real estate, primarily construction. From that base I learned how to create value for properties, by either adding on, or remodeling them. I started to invest with others (through sweat equity) they would invest their funds, I would invest my time and work to create value. We would acquire single family homes and expect to flip (“sell them for a profit”) within 6 months. Eventually, the market went South and there wasn’t much demand for home sales. Looking for opportunities in real estate I started working at Kennedy-Wilson, Inc., at that time, a real estate auction company.
At Kennedy-Wilson I learned about sale and marketing (my first position at the company was an on-site sales/marketing agent). After my stint of on-sites sales and marketing I was transferred into the corporate office to work in the closing department where I met my current business partner, George Pino (who is now the CEO of one of our companies, Commercial Brokers International, Inc.). Our relationship there was short lived, as he laid me off soon thereafter. A couple of months later he was laid off as well, and contacted me to see what work was available for people with our skill set. I had just started with a company called The Sands Group (owned by Fred Sands), which was a start-up real estate auction company. We decided to partner up to help get this start-up going, it was early 1993. Through hard work, persistence, and luck, we soon became the 2nd largest real estate auction company in the Western region within 18 months. After operating the company for six years, Fred sold his entire operations to N.R.T. (a subsidiary of Realology, and the nation’s largest residential real estate brokerage company), who subsequently decided to shut down our real estate auction division.
During this time, George and I started to invest in multi-family properties. I came up with the idea for Learning Links Centers, a socially responsible investment company. The model for Learning Links Centers was essentially to create communities through educational opportunities, and borrowed heavily from my experiences of growing up in Wolbach Nebraska, a small town of 283 people, where if I needed help with school work, I could just go to my teacher’s house and knock! We invested in low to moderate income neighborhoods, took a unit off the market and converted it into what we called a resource room (a room with computers, internet service, educational software and a mini-library with books and games. Additionally, we would discount the rent of a percentage of the units and offer the units to accredited school teachers, who would in turn tutor the children that lived in the building 2.5 hours a day, 4 days a week.
As we were growing this concept, we were approached by DBL Realtors in Los Angeles (a large residential real estate brokerage company) to start their Commercial Real Estate division. The owner of DBL Realtors became an investor in Learning Links Centers, as well as a mentor. Within a few years DBL Realtors had grown quite large and was subsequently sold to, yes you guessed it… N.R.T., who was licensed to do residential real estate. We were notified soon thereafter that the commercial division was being closed down, giving us just 3 weeks notice. After having two companies that we helped build sold and us without jobs again, we decided to no longer build a company for someone else but to maintain that control, and opened our own real estate brokerage company, Commercial Brokers International (“CBI” www.cbicommercial.com)
Taking what we learned from our mentor, we designed CBI to address what we felt was missing in the Commercial Real Estate (CRE) industry. CBI initially stood for Client’s Best Interests, and with that in mind, we also realized that the agents that worked under the CBI umbrella were also our clients. Everything was designed or implemented to create a team atmosphere that first and foremost placed our fiduciary duties to our clients above everything else. From there we realized that many of our clients were struggling with their property management company, and since we had been managing our own investments for nearly a decade by then, we created LLC Property Management (www.llcpm.com), a fee based property management company with the same core values as CBI.
As our investments grew, we expanded Learning Links Centers into other submarkets, including Dallas, TX. After our first acquisition in Dallas, we quickly learned a new term in Dallas property management… skips. A skip (or a skipper), is what the property management company calls someone who moves in on a move in special and then skips on their lease when the full month’s rent is due. When we questioned our managers on why we had so many skips we were told that everyone does and that when they run the credit report it doesn’t show up. This unfortunately was the true, a person who skips has moved out before an eviction can be brought to court, so with no eviction there is no judgement, no judgement equals nothing on their credit report. Even worse, we found out that most managers just traded names of skippers and essentially created a “Black List” of renters not to rent to, which is in violation of federal Fair Credit Reporting Act, and H.U.D. Housing laws.
Seeing a need, we then created The Rent Rite Directory (now theRRD.com, of which I am the C.E.O. of). Originally The Rent Rite Directory was designed to only keep track of skips and other lease violations that are not normally tracked by the credit reporting agencies. It was meant to be a FCRA compliant database for all landlords to easily keep track of lease violations and to share that information with others that had a permissible purpose. It exploded overnight, and this free service was in need of some income to stay open. We could no longer offer the service for free, but did not want to charge our clients for the database since it was building communities and making them better. Instead we became authorized resellers for traditional credit reports and background checks for tenant screening purposes and offered these to our clients at discounted rates to pay for the maintenance of our Incident Reporting Database.
TheRRD kept growing and soon we were getting requests for additional services. Many of these services were already available, but only to institutional, larger, Class A investors. To fill this gap we started to add services that would give our clients (primarily Class B and C investors, and Mom & Pop investors, who make up over 70% of the rental market and real estate agents) many of the same services that were afforded only to Class A institutional investors. We now offer both Tenant and Employment screening services, vendor referral services and lease listing assistance. TheRRD is constantly growing and changing, to offer better services to our clients. We are currently looking to redesign the site to be more user and mobile friendly and offer even more services.
All of our companies have had a recurring theme to them. They have all been geared around real estate, but also, we have always tried to have some sort of social impact or give back to the community. We decided to create a holding company for all of these companies called Pono Asset Management (www.ponoam.com). Pono is a Hawaiian word, and although without a direct English translation, essentially means to do the right thing. With that in mind Pono Asset Management was created as a holding company for our companies but also looking for investments with likeminded future companies.
Great, so let’s dig a little deeper into the story – has it been an easy path overall and if not, what were the challenges you’ve had to overcome?
I’d like to say yes it was a smooth road but as I learned early on from the broken leaf spring on my drive out to California, the road is not always smooth. Like that trip, most start-ups encounter obstacles, and I believe what makes one successful is not a smooth or easy path, but how one navigates each obstacle. So, I think a better question might be not if the path was easy, but rather was it traversable, and yes, although we have had our fair share of bumps in the road we have been able to bypass and learn from them.
For instance, we launched CBI in mid-2006, less than two years later the economy crashed and the commercial real estate market came to a halt. We had to reposition our focus to create business for ourselves and our agents. At the same time, our investments lost value, but we had good cash flow. During that same downturn we lost a lot of property management clients, as they wanted to save the property management fees and manage their properties themselves.
What we learned was that even during changing times and adversity, there are opportunities to be had, you just had to be open to identifying them. A key example to this would be when we started investing in another submarket and had skips, instead of just accepting this was the way things were done, it led to a new company, theRRD.com,
Alright – so let’s talk business. Tell us about Pono Asset Management – what should we know?
Pono Asset Management creates, acquires and invests in companies that share our common vision.
Our goal is to promote the community spirit through our companies’ double bottom line approach of socially conscious investments. It is our belief that working together we can achieve enhanced results.
I am most proud of the double bottom lined approach we have toward investments. Every company we start/invest in must be first and foremost a model that can stand on its own before any social benefits, but also looks to create a social impact.
Is there a characteristic or quality that you feel is essential to success?
The number one quality above anything else would be persistence, followed by a positive can-do outlook, and then the ability to act quickly and create an executable plan of action.